CBAM: current and future obligations for importers of certain carbon-intensive goods

NL Law

The Carbon Border Adjustment Mechanism (CBAM) came into force on 1 October 2023. Importers of certain carbon-intensive goods have to report on emissions released during the production of those goods. From the start of 2026, importers of those carbon-intensive goods will have to buy and submit CBAM certificates. In this blog, we explain the system and discuss the obligations for importers under CBAM.

CBAM: current and future obligations for importers of certain carbon-intensive goods


The Carbon Border Adjustment Mechanism (CBAM) came into force on 1 October 2023. This adjustment mechanism is set out in Regulation 2023/956 (the CBAM Regulation) and is part of the European Union's 'Fit for 55' legislative package. In order to import certain carbon-intensive goods, importers will have to purchase and submit so-called CBAM certificates from the start of 2026. In this blog, we address the purpose of CBAM, the obligations under CBAM, how those obligations will be phased in and how violations of those obligations can be enforced. 

Why has CBAM been introduced?

The aim of the system is equal carbon pricing of products within the EU and imported products. By doing so, the European legislature wants to reduce the risk of carbon leakage: the relocation of carbon-intensive production to countries outside the EU. Carbon leakage does indeed undermine the EU's emission reduction targets, as it does not reduce global greenhouse gas emissions but shifts them to other countries. The current method to counter the risk of carbon leakage is the allocation of free emission allowances under the European Emissions Trading System (ETS). Under ETS, companies with greenhouse gas installations must surrender emission allowances for greenhouse gas emissions released from their activities or products. Currently, this mainly concerns companies in the industrial sector, but this will be extended to include several other sectors (see our blog concerning the extension of ETS to buildings, road transport and maritime transport). Manufacturing products and carrying out activities deemed to be at risk of carbon leakage are on a so-called carbon leakage list. Free emission allowances are partly allocated for these activities. For activities or products that do not involve that risk, companies must buy all emission allowances at auction. The European legislature argues that free allocation of emission allowances weakens the functioning of ETS, which aims at a high emissions price that encourages low-carbon production. CBAM replaces this system with an alternative way to counter carbon leakage risk: by paying a 'carbon price' (via a CBAM certificate) for the import of certain carbon-intensive goods into the EU. Under the ETS, the allocation of free emission allowances will therefore be phased out over the coming years, while obligations under CBAM will be phased in.

To which goods does CBAM apply?

The goods covered by CBAM (CBAM Goods) are iron and steel, cement, electricity, fertilisers, aluminium and hydrogen. The preamble of the CBAM Regulation states that the European legislature mainly wants to bring basic materials and commodities under the system. Therefore, not every product containing a small proportion of aluminium, for example, will be covered by CBAM when imported, but only the raw material and basic materials, such as tubes, pipes and sheets made of aluminium, among other things. Interestingly, electricity falls under CBAM. Under ETS, electricity is not on the carbon leakage list and electricity producers do not receive free emission allowances. Electricity is not easily transported over long distances and is usually produced close to where it is used. Nevertheless, the European legislature considers it important to bring electricity under CBAM, because electricity production is responsible for 30% of greenhouse gas emissions and because EU electricity grids are increasingly connected to neighbouring countries. We expect the European legislature refers to electricity connections with, for example, the UK and Norway. If electricity is not covered by CBAM, this could lead to companies importing more electricity through those grids from non-EU countries, and carbon leakage would still occur.

To which emissions released in the production of CBAM Goods does CBAM apply?

An importer of CBAM Goods will soon be required to submit CBAM certificates. One CBAM certificate corresponds to one tonne of CO2 equivalent of 'embedded emissions' in those goods. Embedded emissions are both direct emissions released during the production process of the goods and indirect emissions released during the production of the electricity used in the production processes. For iron and steel, aluminium and hydrogen, only direct emissions are included in embedded emissions. The European legislature has opted this because financial arrangements apply to producers of those goods within the EU to compensate for indirect emission costs passed on as a result of high electricity prices. In the Netherlands, a subsidy system known as ETS Indirect Compensation Costs (Indirecte Kostencompensatie ETS) applies. If indirect emissions for imported products were included in determining the number of CBAM certificates to be purchased, while the costs for indirect emissions are compensated within the Netherlands, this would not lead to a level playing field, favouring producers within the EU. 

What are the obligations under CBAM?

1. Obligations during the transition period until the end of 2025

The transition period applies from 1 October 2023 to 31 December 2025, in which a reporting obligation and an obligation to request an 'authorised CBAM declarant' status applies to importers of CBAM Goods.

(i) The reporting obligation

During the transition period, a reporting obligation applies to importers of CBAM Goods. The Union Customs Code (Douanewetboek) does not have its own definition of importer. The CBAM Regulation defines an ‘importer’ as "either the person lodging a customs declaration for release for free circulation of goods in its own name and on its own behalf or, where the customs declaration is lodged by an indirect customs representative (…), the person on whose behalf such a declaration is lodged".

Importers must submit a so-called CBAM report no later than one month after the end of each quarter. For the last quarter of 2023, this means that the report must be submitted by the end of January 2024. The report must be submitted to the European Commission, through an online system. In the CBAM report, the importer must state (in sum) (i) the total quantity of imported goods covered by CBAM; (ii) the total quantity of embedded emissions released in the production of those goods; and (iii) the carbon price due in the country of origin for the embedded emissions in the imported goods. The Dutch Emissions Authority (Nederlandse Emissieautoriteit), the competent authority for CBAM, announced on its website that the first reports will be subject to less stringent requirements due to the limited preparation time for this system. These more lenient requirements mean, among other things, that importers may supplement and amend the first two CBAM reports until 1 August 2024 and, for the first three (and five) CBAM reports, to deviate in various ways from the method for determining emissions prescribed in the CBAM regulation. 

(ii) The authorisation application 

The importer must apply for the status of 'authorised CBAM declarant' during the transition period. The importer must obtain this status before the end of the transition period in order to continue to import CBAM Goods into the EU after 1 January 2026. The application for this status can be made after 1 January 2025 by submitting the application for admission through the CBAM register.

In principle, the Dutch Emissions Authority will grant the status of authorised CBAM declarant if the applicant (i) has not been involved in a serious infringement or repeated infringements of customs legislation, tax regulations or market abuse rules in the five years preceding the year of application; (ii) the applicant can demonstrate that it is financially and operationally capable of fulfilling its obligations under the CBAM Regulation; (iii) the applicant is established in the Member State where the application is submitted; and (iv) the applicant has an EORI number (registration and identification number of market operator).

2. Obligations as of 1 January 2026

As of 2026, (i) an obligation to purchase and surrender CBAM certificates; (ii) an obligation to submit a CBAM declaration; and (iii) an additional administrative obligation will apply.

(i) Purchase and surrender of CBAM certificates

First, as of 1 January 2026, CBAM will require importers of CBAM Goods, the authorised CBAM declarants, to purchase and surrender CBAM certificates. As mentioned above, one CBAM certificate equals one tonne of CO2 equivalent of embedded emissions in the goods. Permitted CBAM declarants must therefore surrender one certificate for every tonne of CO2 emitted in the production of the imported goods. The surrendering of CBAM certificates is done by making the certificates available in a CBAM registry, after which the European Commission removes the certificates from the registry. If producers of the goods have already paid carbon costs in a country outside the EU, the importer may request a reduction of the number of CBAM certificates to be submitted. The price of a CBAM certificate is aligned with the price of an allowance under ETS. The price is basically the difference between the price of a CBAM Good produced within the EU (including the emission costs under ETS) and the price of a CBAM Good produced outside the EU (without those emission costs). The current ETS price is determined on the basis of the weekly average of the closing prices of allowances on the ETS auction platform. 

On a quarterly basis, at least 80% of the total quantity of CBAM Goods imported by an authorised CBAM applicant must be covered by CBAM certificates. CBAM certificates cannot be traded: the CBAM explicitly does not provide for a trading system. That would undermine the system, as it would mean that the price of a CBAM certificate would no longer necessarily match the current ETS price. However, the Dutch Emissions Authority may buy back a maximum of one third of the number of CBAM certificates purchased if the admitted CBAM applicant has purchased too many CBAM certificates. Any leftover certificates are automatically cancelled – without compensation – on 30 June of the year following their purchase. This way the system ensures that the price of a CBAM certificate is in line with the ETS price as well, and certificates cannot be purchased at one point in time as a buffer for future years. 

(ii) Declaration obligation

In addition to submitting CBAM certificates, the authorised CBAM declarant must submit an annual CBAM declaration. This declaration must be submitted via the CBAM registry by 31 May following the year for which the declaration is made. The authorised CBAM declarant must file the first CBAM declaration by 31 May 2027 for the year 2026. The CBAM declaration must contain the following information:

  • the total quantity of each type of CBAM Good imported during the preceding calendar year; 

  • the embedded and verified emissions per imported CBAM Good, expressed in CO2 emissions per megawatt-hour or tonne;

  • the number of CBAM certificates to be submitted; and

  • a copy of the verification report issued by an accredited verifier.

(iii) Administrative obligation

Finally, the authorised CBAM declarant must also keep records of all relevant information needed to calculate the embedded emissions. Such records must be sufficiently accurate (i) to enable accredited verifiers to verify the embedded emissions and (ii) to enable the competent authority to review and revise the CBAM declaration if necessary. The authorised CBAM declarant must keep these records for a period of four years after the calendar year in which the relevant CBAM declaration was prepared.

How will CBAM be introduced in the Netherlands?

As stated above, CBAM is included in the CBAM Regulation. A regulation has direct effect in EU Member States and therefore does not require implementation in national legislation. In other words, the obligations under the CBAM Regulation apply directly to importers. However, the reporting obligation has been included in the new Article 16c.1 of Chapter 16c of the Environmental Management Act (Wet Milieubeheer) since 6 December 2023. The grounds for enforcement in case of violation of this article are included in Chapter 18 of the Environmental Management Act.

What are the enforcement possibilities for violations of CBAM?

The Dutch Emissions Authority is in charge of enforcing the obligations under CBAM. Below, we distinguish between enforcement of the reporting obligation (already applicable) and the submitting obligation (applicable from the start of 2026).

(i) The reporting obligation

Importers must submit CBAM reports to the European Commission. Verification of imported goods is carried out at the border by customs. On the entry into force of CBAM, customs must inform the European Commission, through import declarations, of the CBAM Goods being imported. The European Commission checks the submitted CBAM reports based on the import declarations. The European Commission then informs national authorities, including the Dutch Emissions Authority, if there are inaccuracies or incomplete CBAM reports.

If an importer fails to comply with the reporting obligations, the Dutch Emissions Authority may impose an order subject to a penalty, or a fine. The maximum fine is €450,000 per violation. If the turnover of the company concerned exceeds €4,500,000 (in the year before the offence was committed), the maximum fine is 10% of that turnover. 

The Dutch Emissions Authority explains on its website that it will not immediately proceed with enforcement: it has announced that, in the event of inaccuracies or incompleteness, it will first initiate a rectification procedure to receive the missing CBAM report or have a CBAM report supplemented or amended. If the importer fails to comply sufficiently, the Dutch Emissions Authority will take enforcement action. 

(ii) The obligation to surrender CBAM certificates

If the authorised CBAM declarant fails to submit the number of CBAM certificates due by 31 May, the competent authority (the Dutch Emissions Authority in this case) will impose a fine. This follows from the CBAM Regulation. The CBAM Regulation does not give the Dutch Emissions Authority discretion in this matter: if this violation occurs, a fine must be imposed. The amount of the fine is in line with the fine imposed in the case of failure to surrender sufficient emission allowances under ETS. Likewise, if a party that is not an authorised CBAM declarant imports CBAM Goods, the CBAM Regulation requires the competent authority to impose a fine. The legislature has not yet prepared an act to incorporate these enforcement options into national legislation, probably because the surrender obligation does not apply until 2026.

In conclusion

Many new obligations will enter into force in the coming years for importers of CBAM Goods (cement, electricity, fertilisers, iron and steel, aluminium and hydrogen). Since 1 October 2023, a reporting obligation applies and during the transition period the importer must apply for authorisation. By means of the reporting requirement, importers of CBAM Goods will now have an insight into the amount of embedded emissions in the goods they import. By 2026, the authorised CBAM declarant must submit CBAM certificates for embedded emissions released during the production of the CBAM Goods. The CBAM declarant must also file a declaration and keep accurate records.